Debated in Parliament on 8 Sep 2014.
Mr Baey Yam Keng asked the Minister for National Development with regard to the HDB Enhanced Lease Buyback Scheme (LBS) (a) what options does the flat owner have if he outlives the 30-year lease; (b) how can HDB provide greater assurance that these options will be honoured 30 years later; (c) what will happen if a flat under LBS gets selected for the Selective En bloc Redevelopment Scheme; and (d) whether the flat owner will receive the full proceeds in a lump sum should the flat owner's CPF Retirement Account meet the Minimum Sum.
The Minister for National Development (Mr Khaw Boon Wan): Under the current Lease Buyback Scheme (LBS), owners retain a 30-year lease. Those who outlive the lease will not be left homeless. The Housing and Development Board (HDB) will look into the circumstances of each case to work out an appropriate housing arrangement, taking into account the elderly's health condition, financial status and the availability of family support. From April next year, we will enhance the LBS to offer a 35-year lease option. So, this will
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practically bring the age limit to about 100. Those who are concerned about outliving their lease can take up this longer lease option. Any unconsumed lease will be refunded to the estate.
LBS flat owners whose flats are selected for the Selective En bloc Redevelopment Scheme (SERS) will receive compensation based on the balance lease of their flat at the time of the SERS announcement. They will also receive SERS re-housing benefits, which include an option to buy a new replacement flat with the same balance lease as their LBS flat, or a fresh 99-year lease, at a subsidised price.
Owners can retain LBS proceeds of up to $100,000 in lump-sum cash, after they have topped up their Central Provident Fund (CPF) Retirement Accounts. Currently, all owners top up to the age-adjusted prevailing CPF Minimum Sum (MS). From April next year, we are relaxing the CPF top-up requirement for households with two or more owners to require each owner to only top up to half the age-adjusted prevailing MS. They can then retain any remaining proceeds in lump-sum cash.
Mr Baey Yam Keng.
Mr Baey Yam Keng (Tampines): Thank you, Mdm Speaker. I would like to ask the Minister this: no one really knows exactly how long one will live. The case-by-case consideration that the Minister had mentioned may not really be assuring enough for people, when they are planning for their own accommodation to last until the end of their lives. The option of staying with families or at nursing homes may not be something that we want to think through at length in our 90s. I would like to ask whether HDB could, at the onset when the flat owners sign up for LBS, determine the value of lease extension, perhaps on an annual basis, based on the lease value calculated by HDB at the point in time it buys over the balance of the lease? And it is written down on the contract, so that at least, the flat owner knows, "If I need to extend by a year when I outlive the lease, this is the amount I have to pay." That gives a very clear option that flat owners can consider.
The next question I would like to clarify is for those flat owners on LBS affected by SERS, is the Minister saying that the new replacement flat could be offered to the flat owner with a shorter lease based on the lease that they have remaining on their old flat, and therefore, they pay a lower value to get the replacement flat?
On the second question, on SERS re-housing benefits, yes, it will be taken into account in the offered re-housing flat. And depending on the length of the lease, it will be valued as such. At the Ministry of National Development (MND) and HDB, we are not only a compassionate organisation, we are also a very fair organisation. Our
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commitment is that nobody will be left homeless. If somebody is now 100 years old, I am quite sure the whole society and the Government will try very hard to ensure that this 100-year-old or 101-year-old elderly Singaporean will be well taken care of. The case-by-case situation crops up because what is unpredictable or uncertain is the health status of the person. At that point in time, if he or she is not independent, let us say, bedridden, then his or her need may not be a flat. His or her need is a place in a nursing home, in which case, therefore, the Government, as represented by HDB, will work very closely with the Ministry of Health (MOH) to make sure that this elderly Singaporean will be well placed. The option then depends on whether the children are available and are they able to look after the now-no-longer independent senior. That is why the HDB commitment is worded that way.
The Member's suggestion of whether we can commit to a specific value to the lease – in this case, to be applied in 35 years' or 30 years' time – is very difficult. We are committing ourselves to something that is so uncertain. I cannot even tell next year what exactly would be the state of the property market. I have some idea, I have some goal to work towards, but it may not be what I project or plan for it to be. What we can commit as a Government is that nobody will be left homeless. For those who are very concerned about this, we now have this enhancement of an additional five years lease extension, so that instead of 30 years, you can opt for 35 years, which, as I have said, will cover up to age 100.
There is another possibility which we are studying – insurance. There are market solutions to such things. You can buy an insurance policy, so that if you outlive the committed lease, the insurer will take over to make sure that you will continue to be able to stay there and pay for your additional lease. But insurance cuts both ways. If you pass on before the committed lease, then you also lose the benefits. Whereas right now, under our LBS, whatever is not consumed will be refunded to the estate. So, the insurance scheme is not so straightforward. The upside is clear for a very small minority of the beneficiaries of the scheme, but the downside can be very negative for the majority and they may not like it.
Mdm Speaker : Mr Baey Yam Keng.
Mdm Speaker, thank you very much. I would like the Minister to clarify this: is the option to extend the lease already an option that the owner can consider, apart from relocating to a nursing home and so on?
Regarding the SERS compensation, given that the Minister has said that the front end of a new lease is probably more valuable than the tail end of a lease, can the Minister assure that the compensation for the SERS flat will be enough for the flat owner to purchase the new flat, same flat type in the offered precinct? So, that means the compensation is enough for them to pay for whatever lease duration that the replacement flat is being offered to the
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flat owner.
There can be lease extension. It is something for which we can take the cue from the Studio Apartment scheme. Studio Apartments are placed on a 30-year lease. HDB made a commitment for such an extension, if you outlive the 30-year lease. This is possible because many Studio Apartment buyers come in at younger ages, at 55 years. HDB commits to a 10-year extension at market value. The quantum depends on what is the prevailing market value. We can take the cue from the provisions under the Studio Apartment scheme.
For SERS and the Member's comment on what happens if the value of the outstanding lease is less than the assessed value of the flat at the point of the SERS announcement. Let us say, you are now on LBS, and you have committed to 30 years. You have lived 10 years in it, another 20 years left to go and suddenly, there is a SERS announcement. As I have said, the HDB will assess. We will compensate you fairly. If you are in a sold flat, we will assess what is the market value of your flat at the time of the SERS announcement, and we will compensate you and also offer you some re-housing benefits. That is for sold flats.
Likewise, if you happen to be on the LBS, we will also assess what is the market value of your LBS flat at that point in time, and then, we will compensate you accordingly. In fact, because you are already on LBS and your retained lease has already been assessed a few years before when you joined LBS, HDB's arrangement is that should the remaining value of your lease be less than the market value of your property at the time of the SERS announcement, we will offer an ex gratia to top up. We are a very fair organisation.
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